European car makers rev-up push against luxury car tax

European car makers have called for the luxury car tax and 5 per cent duty on imported cars to be scrapped, saying the argument for these measures disappeared with the closure of local auto manufacturing.

The renewed push against the federal taxes, which combined cost overseas car makers and their Australian customers more than $1 billion in the last financial year, comes shortly before the next round of trade negotiations between the European Union and Australia over a free trade deal.

A key EU trade negotiator told The Age and Sydney Morning Herald recently that the EU's push for removal of the two taxes was one of its "key demands". If the taxes were abolished the cost of a range of European models made by BMW, Mercedes Benz, Audi and others would be cut.

"The federal luxury car tax should have been abolished when local car manufacturing across the country concluded in 2017. It does not provide a level playing field and unnecessarily distorts the pricing of brands such as ours that are constantly bringing the latest technology to the market," said BMW Australia Group chief executive Vikram Pawah.

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"It adds unnecessary costs for buyers and therefore impacts the sluggish economy and declining automotive industry that employs thousands of people," he said.

Mr Pawah backed a free trade deal between Australia and the EU and said removing the luxury car tax and import duty would benefit buyers and generate activity in the sector.

It's not just that 5 per cent tariff that needs to be dumped, it's also the luxury car tax that needs to be dumped as well.

Glen Sealey, chief operating officer of Maserati Australia, New Zealand and South Africa

Mercedes-Benz Australia/Pacific boss Horst von Sanden echoed the sentiments of BMW, saying Australian consumers faced an array of fees and charges imposed by federal and state governments that inflated car costs.

"The [luxury car tax] is an outdated, unjustifiable and unnecessary tax. We have been encouraging the government for many years to abolish this redundant tax," he said.

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"Consumers and the industry cannot see a reason for it anymore; now is the time for the government to have a really serious look into this topic."

Glen Sealey, chief operating officer of Maserati Australia, New Zealand and South Africa, called for a thorough examination of "a taxation system that's unfair" on the car industry.

"When you look at the Australian market overall it's not just that 5 per cent tariff that needs to be dumped, it's also the luxury car tax that needs to be dumped as well," he said.

"The luxury car tax itself is really a tax on technology, it's a tax on the best cars that come into the market. And ultimately the technology at the top end rolls down to the bottom end of the market over time. So it's crazy that we're taxing, really, what is the R&D spend of the industry at a higher level," he said.

The luxury car tax was "unfair" in the sense that it singled out motor vehicles, while buyers of multi-million-dollar boats did not pay a luxury tax, he said.

"You're already paying, don't forget, GST, stamp duty, and now you're paying luxury car tax as well – so it's a tax on a tax on a tax," he said.

"The only thing that the luxury car tax does is create revenue for the government," he said.

"I think it's going to be a very substantial issue in the trade discussions, and I suspect there will be a lot of pressure put on the Australian government to eradicate the tax as part of the free trade agreement," he said.

"The luxury car tax should just be abolished. The gains from signing a free trade agreement with Europe must dwarf this, in terms of economic activity," he said.

Australia has a 5 per cent tariff on European cars and a 33 per cent luxury car tax on higher-priced vehicles. For "fuel-efficient vehicles" the luxury car tax kicks in on cars above $75,526; for other vehicles the threshold is $67,525.

States also levy stamp duty on car sales, and the Queensland and Victorian governments have angered the car industry by imposing their own version of luxury car taxes recently, on vehicles above $100,000.

Last month Trade Minister Simon Birmingham said Australia would drive "a very hard bargain" in negotiations with the EU as it sought more opportunities for Australian exporters. EU requests on tariffs, including on cars, would be considered in the context of the overall deal, he said.

Volkswagen also took aim at the 5 per cent import duty.

"Rival brands that import cars from Japan, South Korea, Thailand and the US have a 5 per cent advantage due to free trade agreements. The repeal of this outdated tariff would at last provide a level playing field in the market, improving competition and resulting in better equipped cars at lower prices," said Volkswagen's Australian managing director Michael Bartsch.

In the 2018-19 financial year the luxury car tax generated revenue of $640 million and the car import duty revenue of $450 million for the Commonwealth.

In 2017 more than 91,000 vehicles imported from Germany attracted the 5 per cent import tariff, putting it well ahead of any other car-making country.